Big company bosses lose only a fraction of their pay when employees die on the job, according to research by an influential shareholder advisory group that has called for an end to the “flawed model” of paying bonuses simply for keeping workers alive.
Top executives in those boardrooms with bonuses tied to reducing worker fatalities lost an average of only £33,600 per worker – less than 1% of their average total pay – when an employee did die in the 2019-20 reporting period, research by the shareholder advisory firm Pensions & Investment Research Consultants (PIRC) found.
At least two companies had not reported docking their top executive’s health and safety bonus at all after employees died, PIRC said based on analysis of annual reports from 38 FTSE 350 companies in which at least one person died at work between 2015 and 2019.
The amounts lost by executive directors at those companies that did cut bonuses varied by company. Balfour Beatty, the FTSE 250 infrastructure building group, cut executive directors’ bonuses by only £12,500 per worker who died during the 2019-20 reporting period. That was the smallest bonus cut PIRC found among those companies that did adjust for worker deaths.
Evraz, the FTSE 100 steel maker, whose biggest shareholder is Chelsea Football Club owner Roman Ambramovich, cut bonuses by £61,207 per fatality – the biggest cut from the companies surveyed. However, 47 of Evraz employees and contractors have died on the job since 2016, according to its latest annual report.
Conor Constable, the PIRC researcher behind the report, called for the link between bonuses and health and safety to be broken, saying that keeping employees alive should be a basic requirement rather than something that merited an extra pat on the back.
He accused the firms of being guilty of a “dispassionate” approach to the tragic deaths of their workers, adding that they “appear to have quantified or put a value or a price on the life of an employee”.
Luke Hildyard, the director of the High Pay Centre, agreed. He said: “If chief executives are less likely to take the necessary measures to protect their employees if they are not financially incentivised to do so, that is a terrible judgment on their character and integrity made by their own boards.”
Constable added that if workers died on the job, the discussion should no longer be about the chief executive’s bonus but “fundamental changes to the business, its leadership and its governance”.
Contrasting the approach towards executives and staff, he pointed out that the latter would not usually expect a bonus for upholding safety standards but could expect the sack for not doing so.
The Trades Union Congress’s head of health and safety, Kevin Rowan, said: “It’s vital that employers take health and safety seriously at the highest levels of their organisation. If it’s not considered important in the boardroom, why would any manager or worker be expected to take it seriously?”
The PIRC analysis – entitled How Much is a Worker’s Life Worth? – found no evidence of a reduction in the number of deaths at work as a result of the link to executive pay.
Of the 22 firms in which an employee died on the job in 2019 – the latest comparable reporting period – 12 made no cut to their top executive’s bonus; including two in which policies explicitly linked executive bonuses and worker fatalities. In the other 10, the top executive’s average decrease was £32,628, or 0.85% of their total 2019 remuneration.